Healey Faces Cabinet Opposition on Bank Tax Proposals
Chancellor John Healey is encountering internal resistance over plans for increased bank taxation ahead of his first budget, sources indicate.
Chancellor John Healey is facing a Cabinet revolt over proposed higher taxes on banks as he prepares his first Budget, according to reports. Ministers have reportedly warned Healey that a raid on the banking sector could undermine Prime Minister Andy Burnham's commitment to economic growth.
The Chancellor is scheduled to meet with the heads of major UK banks on Tuesday. Leaders from Lloyds Banking Group, Barclays, HSBC, and NatWest Group are expected to attend, aiming to solidify their opposition to potential new levies.
This comes as Healey grapples with balancing the government's books. He is under pressure from trade union leaders to implement a tax hike on banks to fund energy bill reductions for consumers this winter. Simultaneously, he must secure billions of pounds for the Government's Defence Investment Plan.
Adding to his fiscal challenges, Healey's available financial headroom has reportedly narrowed to approximately £12 billion. This reduction is attributed to the economic impact of the conflict in Iran and rising public borrowing costs.
Concerns about the proposed tax increases have also been voiced by international financial leaders. Jamie Dimon, CEO of JP Morgan, has cautioned that raising the surcharge on bank profits could lead to investment shifting to other countries.
Senior ministers have expressed reservations to The Telegraph, stating that a bank tax would send an unfavorable message to potential investors in the UK. One minister noted the unsuitability of imposing multiple tax increases simultaneously, especially as businesses are already contending with higher business rates and National Insurance contributions.
Sources within the Treasury indicated that Healey intends to adopt a listening approach during his upcoming summit with banking executives. Official figures show that the banking sector's tax contributions rose by 8.5% to £39.1 billion in the 2025-26 tax year. Receipts from the surcharge on bank profits saw a significant increase, largely driven by an overall rise in industry profits.
The Trades Union Congress has proposed increasing the current 3% surcharge on bank profits to at least 8%, which they estimate could generate £9 billion for the Treasury over four years.
A Treasury spokesperson stated, "As has always been the case, decisions on tax are a matter for the Chancellor to set out at fiscal events, rather than routinely commenting on rumour, speculation or proposals."